Dis-Chem warns of consumer pain in South Africa

Dis-Chem lowered its dividend for the financial year ended 29 February 2024 (FY24) and expects the consumer to remain constrained amid the current economic climate.

The group’s results were impacted by base effects in the prior year’s performance, with the prior year boosted by the acquisition of warehouse properties – resulting in a R72 million once-off gain from the release of the lease liability and right-of-use asset.

The prior year was also impacted by COVID-19 vaccine administration and testing services, which have ended and did not contribute to the current financial period.

Basic earnings per share (EPS) and basic headline earnings per share (HEPS) are 114.7 cents and 114.6 cents per share, respectively, a decrease of 1.4% and 1.6%.

When excluding the once-off property gain in the prior year, EPS and HEPS would have increased by
4.0% and 3.8%, respectively.

Over the period, the group’s revenue increased by 11.1% to R36.3 billion, with retail revenue growing by 9.7% to R31.7 billion.

The end of COVID-19 vaccine administration and testing services in FY24 also impacted retail revenue growth. If the contribution of the COVID-related activities were excluded from both periods, retail revenue would have increased by 10.3%.

With the drop in headline earnings, the group’s total dividend for the year dropped by 1.8% to 45.74 cents per share.

Outlook

For the three-month period from 1 March to 25 May 2024, the group’s revenue grew by 11.4% .

“The group expects that the consumer will remain constrained due to the current economic climate.”

“The group continues to adapt to the current environment, mitigating the near-term impact on the business.”

“The resilient nature of the markets in which the Group operates, together with the brand position, proven business model, and heightened focus on key drivers of growth, will position it for success in the future.”

Dis-Chem is not the first retailer to highlight the pain facing consumers, with its rival Clicks and Woolworths recently sharing similar sentiments in their financial results.

However, Dis-Chem has identified eight areas of focus to improve shareholder returns over the long term, including adding 137,000 sqm of retail space and expanding its wholesale market share.

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